S 114 – (1) CIPFA’s approach

November 26th, 2020 by Peter Oldham QC in Capital Finance and Companies, General, Judicial Control, Liability and Litigation, Local Authority Powers

This is the first of a short series of posts about s 114 of the Local Government Finance Act 1988. They look at (1) CIPFA’s approach announced in June 2020, (2) the s 114 notice in Croydon and (3) yesterday’s Treasury response to consultation about PWLB lending terms.

Under s 114(3) of the LGFA 1988:-

114(3)     The chief finance officer of a relevant authority shall make a report under this section if it appears to him that the expenditure of the authority incurred (including expenditure it proposes to incur) in a financial year is likely to exceed the resources (including sums borrowed) available to it to meet that expenditure.

In the light of the pandemic, and its impact on LAs’ finances, CIPFA put out this statement in June 2020 – and note the words “due to COVID-19” which I’ve put in bold, and whose significance I will pick up in my next post:-

“The role of S.114 in the current crisis has been the subject of understandable debate. This statement confirms that the statutory responsibilities of the CFO has not changed. However, CIPFA proposes that there should be a temporary modification to existing guidance in order to create an opportunity, within existing statutory limits, to enable an exploration of what further options and/or financial assistance may be available.

The proposed modifications are as follows:

  • At the earliest possible stage a CFO should make informal confidential contact with MHCLG to advise of financial concerns and a possible forthcoming S.114 requirement
  • The CFO should communicate the potential unbalanced budget position due to COVID-19 to MHCLG at the same time as providing a potential s 114 scenario report to the council executive (Cabinet) and the external auditor

In practice this means it should not normally be necessary for a s.114 report to be issued while discussions with the government that would address the issue are in progress.

It is important to note that this modification does not change the statutory responsibilities of S.151 officers.

Where there is any doubt the CFO should of course revert to the statutory requirements of S.114.”

Rob Whiteman, Chief Executive of CIPFA, was quoted on Room 151 as follows on 23rd June 2020:-

“These temporary changes are designed to facilitate dialogue between local and central government. Prior to these changes, difficult conversations remained both internal and informal, and councils were able to issue notices without involving central government beforehand. Due to current pressures, this can no longer be the case.

The additional breathing room created by these amendments should ensure that more finance directors are able to meet their statutory responsibilities, while avoiding a premature S.114 notice, and the resulting freeze on local spending that inevitably follows.

The modifications do not change the statutory duty of the Section 151 officer. Our hope is that they support local authorities to impress upon government both the urgency of the need for additional funding to deal with the current crisis, as well as the thorny issue of local government funding in its entirety.”

Private Eye ran the following story in early summer 2020:-

“According to a senior figure in local authority finances, the local government ministry feared that if one council issued a S114 notice, many others would swiftly follow. They said that Robert Jenrick’s Ministry of Housing, Communities and Local Government, “…could cope with one or two S114 notices, but they wouldn’t be able to deal with 20 or 30”.”

CIPFA’s guidance was aimed at putting a buffer between LAs and the need to issue a s 114 notice, by strongly encouraging LAs to talk to the MHCLG “at the earliest possible stage”, as those discussions might “address the issue”.  But it made clear that – as was of course the case – this approach did not, and could not, alter the s 151 officer’s duties under s 114.

Peter Oldham QC

 

Consultation

November 24th, 2020 by James Goudie KC in Decision making and Contracts

In R ( Article 39 ) v SoS for Education (2020) EWCA Civ 1577 the Court of Appeal holds that the omission by the SoS to include in consultation bodies representing children in care, before making coronavirus amendments to SIs governing the children’s social care system, was unlawful. The Court sets out the general principles relating to consultation at paragraphs 26-37 inclusive, and its discussion and conclusions from paragraph 75.

Read more »

 

Restitution

November 23rd, 2020 by James Goudie KC in Judicial Control, Liability and Litigation

In Test Claimants in Franked Investment Group Litigation v HMRC (2020) UKSC 47 the Supreme Court hols that (1) by a 4-3 majority, Section 32(1)(c) of the Limitation Act 1980 applies to mistakes of law, following Kleinwort Benson v Lincoln City Council (1999) 2 AC 349, and (2) time begins to run when the claimant discovers, or could with reasonable diligence discover, his mistake, in the sense of recognizing that a worthwhile claim arises, departing from Deutsche Morgan v IRC (2006) UKHL 49. The case is also of interest with respect to both cause of action and issue estoppel.

 

Directions

November 23rd, 2020 by James Goudie KC in Local Authority Powers

Where there is a statutory power for a Secretary of State to give a Direction, that power does not extend to the giving of a Direction not to comply with statutory duties, under that or another statute, absent clear words to that effect. So held in VIP Communications Ltd v SSHD (2020) EWCA Civ 1564.

 

Houses in Multiple Occupation

November 20th, 2020 by James Goudie KC in Housing

Is a local housing authority, in deciding whether a person is a “ fit and proper person” for the purposes of an application to be a licence holder or manager of a house regulated under the Housing Act 2004, is the authority entitled to take into account a person’s spent conviction and the conduct underlining it? This was the question before the. Our team of Appeal in Hussain v Waltham Forest LBC (2020);EWCA Civ 1539. The Court holds that a LHA’s consideration and determination of a grant, or revocation, of a licence under Part 2, or Part 3, of the Housing Act involves proceedings that under the Rehabilitation of Offenders Act 1974 give the LHA power to consider a spent conviction under that Act, provided that it is satisfied that justice cannot otherwise be done.

 

Anonymity

November 12th, 2020 by James Goudie KC in Housing

Section 166(4) of the Housing Act 1996 provides that the fact that a person has applied for an allocation of social housing is not to be divulged without their consent to any other member of the public. However, in XXX v Camden LBC (2020) EWCA Civ 1468 the Court of Appeal holds that does not extend to entitlement to anonymity when seeking judicial review of a local authority decision about such an allocation, even when medical information is involved. A balancing exercise of the relevant interests, including open justice, has to be carried out.

 

Pay Policy

November 12th, 2020 by James Goudie KC in Local Authority Powers

An employer’s need to reduce staff costs is capable of being a legitimate aim. That May if the measures are proportionate justify what would otherwise be indirect age discrimination. In Heskett v SoS for Justice (2020) EWCA Civ 1487 the Court of Appeal held that a limit on pay increases had been justified, notwithstanding that it resulted in a significant slowing of pay progression for employees under 50 as compared with those over that age.

 

Anti-Social Behaviour

November 11th, 2020 by James Goudie KC in Local Authority Powers

An Injunction pursuant to Section 222 of the Local Government Act 1972 to restrain anti-social behaviour, “street cruising”, was upheld in Sharif v Birmingham City Council (2020) EWCA Civ 1488, notwithstanding the alternative remedy for community protection of making a Public Spaces Protection Order under Part 4 of the Anti-Social Behaviour etc Act 2014. There was a widespread problem in the Council’s area and the Council’s attempts to deal with it by means short of an injunction had been unsuccessful. Bean LJ said, at para 42, that it was “a classic case for the grant of an injunction”.

 

Fiduciary Duty

November 9th, 2020 by James Goudie KC in Housing

In R ( Clark ) v Birmingham City Council (2020);EWCA Civ 1468 the Court of Appeal held that the Council had not acted unlawfully in deciding to incur spending on retrofitting sprinklers in its tower blocks, held under Part 2 of the Housing Act 1985. It did not owe a fiduciary duty to the tenant claimant.

 

Water and Sewerage Charges

October 27th, 2020 by James Goudie KC in Housing

The first instance Judgments in Jones v Southwark and Kingston v Moss, noted in this Bulletin on 3 December 2019, have been upheld by the Court of Appeal: (2020) EWCA Civ 1381. The Councils are resellers within the meaning of the Water Resale Order 2006, Thames Water Utilities having contractually supplied water and sewerage services to the authority, not to its tenants.

 

 

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